Delta Air Lines in the past year has created a new way for corporate travel managers to contractually integrate private jet services and traditional commercial airline agreements. As the only major U.S. carrier with a corporate aviation subsidiary, Delta is trying to leverage the services offered by Delta AirElite, while also exploring potential connections between mainline Delta corporate contracts and its in-house aircraft charter operation.
Business aviation industry data suggest there may be vast potential in linking corporate jet services and commercial airline services. The National Business Aviation Association said 26 percent of its 7,500 members last year were companies with flight departments that spent more than $11 billion annually on commercial airline tickets.
Delta AirElite—which in 2000 became part of the Delta portfolio—offers private jet membership programs and aircraft management services that are not unique in the industry. Their links to mainline Delta, however, may serve as a competitive advantage in courting corporate clients. Not only is elite traveler status extended across both entities, but, more importantly for corporate travel purchasers, any spend on Delta AirElite services now can contribute as pass-through revenue toward negotiated mainline Delta revenue goals, up to 10 percent.
"It makes sense for a company that is looking to leverage purchasing power," said Cameron Gowans, Delta AirElite director of sales and marketing. "The market is expanding. As the cost of entry and the level of commitment continues to progress downward, more companies are using business jets."
Now in its 20th year of operation, the wholly owned subsidiary of Delta Air Lines offers an array of private jet services but describes its Fleet Membership program as the flagship product. It was launched last year
(BTN, March 10, 2003) and since has been complemented by Fleet Membership Select, also called Flexjet Membership. The newer program provides members access to Delta AirElite aircraft, as well as more than 100 private jets operated by Bombardier FlexJet, a fractional ownership company.
Gowans said corporate customers have joined these programs for a variety of reasons, particularly for supplemental lift to add to a fractional program or a fully owned private jet. "In the case of a merger, for example, additional service is needed, but the client wouldn't buy an asset just for the short term," he said. "Another client recently signed up while its private jet was being refurbished."
Meanwhile, parent company Delta is examining ways of tying together its in-house charter operation with existing corporate sales agreements. "We want to do something similar to what we have done with AirElite, but we still are in discussion," said Steve Smith, Delta Air Lines managing director of corporate sales. "It can be extra added value that will help us differentiate ourselves."
Smith said there may be more opportunity for such programs now, given the number of idled planes removed from scheduled service in recent years, but acknowledged the relative high costs of buying charter services compared with mainline flying. Delta's chartering, for the most part and similar to other major carriers, provides transport for corporate incentive trips, special events and sports teams. "A lot of larger companies have their own aviation departments or private jets, and it is a pretty competitive market," Smith noted, "so we are also taking a look at the midmarket."
Other major airlines said their charter operations have not been linked contractually to standard commercial arrangements—nor are there any plans to do so. American Airlines parent AMR Corp. in the late 1990s sold off its corporate aviation interests, and United Airlines parent UAL Corp. in 2002 folded the ill-fated Avolar corporate jet project after less than one year of operations.
In some cases, commercial airlines are creating higher-end products that operate as regular, scheduled service but are marketed as corporate jet services. A notable example is Lufthansa's all-business class service between Dusseldorf and both Chicago and Newark and between Munich and Newark
(BTN, March 12, 2003), a model the German carrier is considering for expansion. "We are investigating if we can go farther with this concept by maybe connecting more German cities to the U.S.," said Thierry Antinori, Lufthansa executive vice president of sales and marketing, during a briefing with BTN late last year. Lufthansa also hinted that the all-business class operation, furnished by PrivatAir, could add other new markets, perhaps "to another continent," for large corporate accounts.
Air France also recently launched service to destinations in the Middle East and central Asia, tailored to corporate clients in the energy industry
(BTN, Feb. 9).